India: bullish on solar energy

Jun 21, 2010 - Datamonitor - energycentral.com

India added a record 2.33GW of renewable energy capacity in the past year, but only a miniscule 8MW was contributed by solar power. However, the government is now promoting the use of solar technology through various incentives; if these work, Datamonitor believes that they could lead to sizeable investments in this sector.

Between March 2009 and March 2010, India added 2.33GW of grid-connected renewable power capacity, more than double the amount installed in the previous year. It now has about 16.8GW of renewable energy capacity, contributing approximately 7% of the total capacity in the country.

Within the renewable space, India has traditionally invested in wind power, with more than 60% of the total renewables grid enhancement in the last year coming from wind. However, the government is now looking at solar energy as an important growth area and has set up the National Solar Mission to promote sustainable growth while addressing India's energy security challenges. The goal of this initiative is to have 20GW of installed solar energy capacity in the country by 2022.

To achieve this, India has introduced policies and regulatory measures, such as financial incentives, capital subsidies and cuts to customs duties. The government has also made provisions to attract international investors. One example of major foreign investment was the Clinton Climate Initiative entering into an agreement with the Rajasthan state government in January 2010 to set up solar parks in the state. As a result of this, more than 80 power companies (mainly domestic firms including Reliance Industries, Jindal Power, GVK Power & Infrastructure and Moser Baer Photo Voltaic), have registered with the state government of Rajasthan with a view to setting up solar plants. Furthermore, Moser Baer recently commissioned its largest thin film solar farm, with an installed capacity of 1MW, in the state of Maharashtra under a consortium agreement with the Germany-based SunEnergy Europe.

On the back of government investments and incentives, the solar energy sector has become attractive for equipment manufacturers and also engineering, procurement and construction players. Given India's ever-growing energy demand and the availability of sun and wind resources all year round, Datamonitor believes that the nation will continue to see a slew of foreign investments and collaborations in renewable-based power generation projects. Furthermore, there exist multiple opportunities for technical collaboration and investments based on public-private-partnerships across the renewable value chain, particularly in the solar sector.